Buying house from parents - what do I need to know?

BuyingFromParents

(Sorry for the throwaway acct)

My parents have decided they want to sell up and move somewhere more suitable for their age. They've floated the idea of me & the wife buying the place from them. They've even offered to knock the price down (a little) to reflect no estate agents fees & quick sale. It's a freehold in England.

Are there any "gotchas" we should be aware of if buying from family? I know that if they discount the property heavily then die, there might be an inheritance tax charge.

Do mortgage lenders have a problem with you buying from family? Will solicitors be an issue? Anything else we need to know?

Thanks all - getting a bit excited at the thought of owning my childhood home!

G_M

As you say, there could be an inheritance tax issue if they die within 7 years and have obviously discounted the price (a gift). However, I hypothesise that you would probobly be a Beneficiary of their will (?) in which case inheritance tax would be payable anyway before you inheritted...

Otherwise the purchase is no different to any other.

Though I guess you might choose to skip some of the searchs since you know the property well (eg you don't need to check if it's built on a disused landfill/petrol station etc).

SmlSave

Your mortgage lender doesn't need to know your buying it from family unless the discount is large and they ask why.

You still need a solicitor who will treat it like a normal house purchase.

When you move in and it becomes your home - remember that you can't then moan to your family if the boiler goes etc.

getmore4less

Inheritance tax charge is unlikely to ever come your way unless they discount you OVER £325k or make other gifts taking the total over £325k.

Gifts that become PETS very rarely increase the IHT burden on an estate.

If it is just the cost savings there is no gift and they could gift/discount £12k IT exempt if they both have not used their £3k annual allowance for 2014/15.

If you need a mortgage then a deposit and all their requirements will drive the transfer.

martindow

getmore4less wrote: »

Inheritance tax charge is unlikely to ever come your way unless they discount you OVER £325k or make other gifts taking the total over £325k.

Gifts that become PETS very rarely increase the IHT burden on an estate.
.

Won't it be the value over £650k as there are two parents? On the death of the first person the surviving spouse will inherit IHT free, but their allowance will remain available to be taken into account when the second parent dies.

eddddy

G_M wrote: »

Though I guess you might choose to skip some of the searchs since you know the property well (eg you don't need to check if it's built on a disused landfill/petrol station etc).

Although, whilst you may be happy to skip some/all of the searches, your mortgage lender may insist that they are done.

Assuming you're in England/Wales, you can see what the lender will require your solicitor to do: https://www.cml.org.uk/lenders-handbook/englandandwales/ and scroll down to: 5.4 Searches and Reports.

(But your solicitor will know all that anyway - you don't have to tell them.)

getmore4less

martindow wrote: »

Won't it be the value over £650k as there are two parents? On the death of the first person the surviving spouse will inherit IHT free, but their allowance will remain available to be taken into account when the second parent dies.

That's not how it works unless you are lucky to have the gift from the parent that dies second(or that what you say happened).

ON first death their PETS get added up and use up some of the £325k nill rate band, leaving less(as a %) for the second death.

jonathanrolande

Should all be ok. My only concern might be transparency for any other siblings ie to demonstrate it is not a knockdown price.